DBRS Finalizes Provisional Ratings on J.P. Morgan Mortgage Trust 2014-OAK4 Mortgage Pass-Through Certificates, Series 2014-OAK4

DBRS has today finalized the following provisional ratings on the Mortgage Pass-Through Certificates, Series 2014-OAK4 (the Certificates) issued by J.P. Morgan Mortgage Trust 2014-OAK4 (the Trust):

-- $270.4 million Class A-1 at AAA (sf)
-- $270.4 million Class A-2 at AAA (sf)
-- $252.3 million Class A-3 at AAA (sf)
-- $252.3 million Class A-4 at AAA (sf)
-- $189.2 million Class A-5 at AAA (sf)
-- $189.2 million Class A-6 at AAA (sf)
-- $50.5 million Class A-7 at AAA (sf)
-- $12.6 million Class A-8 at AAA (sf)
-- $63.1 million Class A-9 at AAA (sf)
-- $201.8 million Class A-10 at AAA (sf)
-- $201.8 million Class A-11 at AAA (sf)
-- $37.8 million Class A-12 at AAA (sf)
-- $50.5 million Class A-13 at AAA (sf)
-- $12.6 million Class A-14 at AAA (sf)
-- $12.6 million Class A-15 at AAA (sf)
-- $18.1 million Class A-16 at AAA (sf)
-- $18.1 million Class A-17 at AAA (sf)
-- $320.4 million Class A-X-1 at AAA (sf)
-- $270.4 million Class A-X-2 at AAA (sf)
-- $18.1 million Class A-X-3 at AAA (sf)
-- $252.3 million Class A-X-4 at AAA (sf)
-- $189.2 million Class A-X-5 at AAA (sf)
-- $12.6 million Class A-X-6 at AAA (sf)
-- $320.4 million Class A-X-7 at AAA (sf)
-- $201.8 million Class A-X-8 at AAA (sf)
-- $8.4 million Class B-1 at AA (sf)
-- $7.5 million Class B-2 at A (sf)
-- $7.8 million Class B-3 at BBB (sf)
-- $5.5 million Class B-4 at BB (sf)

In addition, DBRS has today assigned the following new rating on the Certificates issued by the Trust:
-- $50.0 million Class A-18 at AAA (sf)

Class A-X-1, Class A-X-2, Class A-X-3, Class A-X-4, Class A-X-5, Class A-X-6, Class A-X-7 and Class A-X-8 are interest-only certificates. The class balances represent notional amounts.

Class A-1, Class A-2, Class A-3, Class A-4, Class A-6, Class A-7, Class A-9, Class A-10, Class A-11, Class A-13, Class A-14, Class A-16, Class A-X-2, Class A-X-7 and Class A-X-8 are exchangeable certificates. These classes can be exchanged for combinations of base certificates as specified in the offering documents.

Class A-5, Class A-8, Class A-12, Class A-15 and Class A-18 are super senior certificates. These classes benefit from additional protection from senior support certificates (Class A-17) with respect to loss allocation.

The AAA (sf), AA (sf), A (sf), BBB (sf), BB (sf) ratings on the Certificates reflect 9.90%, 7.55%, 5.45%, 3.25% and 1.70% of credit enhancement, respectively. Other than the specified classes above, DBRS does not rate any other classes in this transaction.

The Certificates are backed by 434 loans with a total principal balance of $355,640,626 as of the Cut-off Date (September 1, 2014).

The mortgage loans were originated or acquired by RPM Mortgage, Inc. (RPM; 21.8%), Opes Advisors, Inc. (16.1%), Homestreet Bank (Homestreet; 9.2%), Stonegate Mortgage Corp. (5.8%) and various other originators, each comprising less than 5% of the mortgage loans. The loans will be serviced or subserviced by RPM (19.8%), PHH Mortgage (16.6%), Dovenmuehle Mortgage Inc. (15.4%), Shellpoint Mortgage Servicing (15.2%), Homestreet (8.3%) and various other servicers, each comprising less than 5% of the mortgage loans. For this transaction, Wells Fargo Bank, N.A. (rated AA (high) with a Stable trend by DBRS) will act as the Master Servicer, Securities Administrator and Custodian. The transaction employs a senior-subordinate shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

The ratings reflect transactional strengths that include high-quality underlying assets, well-qualified borrowers and a satisfactory third-party due diligence review.

Compared with other recent prime jumbo securitizations, the JPMMT 2014-OAK4 pool has a high concentration of loans in California, particularly in the San Francisco area. Performance of loans that are highly concentrated in a particular region may be more sensitive to any deterioration in economic conditions or the occurrence of a natural disaster in that region. In addition to model-calculated pool asset correlation, which was already elevated, DBRS increased the market value decline assumption for all properties in the San Francisco area by an additional 50% at the AAA-rating level when performing its analysis. DBRS’s given expected losses were then adjusted upward to be able to withstand such sensitivity test.

Compared with other post-crisis representations and warranties frameworks, this transaction employs a relatively weak standard, which includes materiality factors, the use of knowledge qualifiers, as well as sunset provisions that allow for certain representations to expire within three to six years after the closing date. The framework is perceived by DBRS to be weak and limiting as compared with the traditional lifetime representations and warranties standard in other DBRS-rated securitizations. To capture the perceived weaknesses in the representations and warranties framework, DBRS reduced the origination scores for each of the originators in this pool. A lower originator score results in increased default and loss assumptions and provides additional cushions for the rated securities.

The full description of the representations and warranties framework, the mitigation factors and DBRS’s loss adjustments are detailed in the related rating report.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are RMBS Insight 1.2: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, Unified Interest Rate Model for U.S. RMBS Transactions, Third-Party Due Diligence Criteria for U.S. RMBS Transactions, Representations and Warranties Criteria for U.S. RMBS Transactions and Legal Criteria for U.S. Structured Finance, which can be found on our website under Methodologies.

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link or by contacting us at info@dbrs.com.

These ratings are endorsed by DBRS Ratings Limited for use in the European Union.